GIFT  OF 


8061  '12  W  IVd 
'A  'N  ' 


THE  STREET  RAILWAY  QUESTION 
IN  CHICAGO 


BY 


JOHN    A.  FAIRLIE 

UNIVERSITY   OF  MICH; 


REPRINTED  FROM 

THE  QUARTERLY  JOURNAL  OF  ECONOMICS 
VOL.  XXL,  MAY,  1907  - 


$ 


.  .  .  THE  .  .  . 

QUARTERLY  JOURNAL    OF  ECONOMICS 

Published  for  Harvard  University 

Is  established  for  the  advancement  of  knowledge  by  the  full  and  free  discussion 
of  economic  questions.  The  editors  assume  no  responsibility  for  the  views  of 
contributors,  beyond  a  guarantee  that  they  have  a  good  claim  to  the  attention  of 
well-informed  readers. 

Communications  for  the  editors  should  be  addressed  to  the  Quarterly  Journal 
of  Economics,  Cambridge,  Mass.;  business  communications  and  subscriptions 
($J.oo  a  year],  io  Geo.  H.  Ellis  Co.,  272  Congress  Street,  Boston,  Mass. 


CONTENTS  FOR   FEBRUARY,   1907 

I.     THE   TAXATION   OF   CORPORATIONS   IN    MASSACHUSETTS     . 

II.     CAPITAL  AND   INTEREST  ONCE   MORE:    II.     A   Relapse  to  the 
Productivity   Theory 

III.  CONSTANT      AND     VARIABLE      RAILROAD      EXPENDITURES 

AND   THE   DISTANCE  TARIFF 

IV.  THE     SOCIALIST     ECONOMICS     OF     KARL    MARX     AND     HIS 

FOLLOWERS.     II. 

V.     LABOR   ORGANIZATION   AND   LABOR   POLITICS,    1827-37     . 
NOTES  AND   MEMORANDA: 

An  Assize  of  Bread  at  Mobile,  Alabama 

The  German  Imperial  Inheritance  Tax 

RECENT   PUBLICATIONS   UPON   ECONOMICS. 


Charles  J.  Bullock 

E.  Bohm-Bawerk 

M.  O.  Lorenz 

Thorstein  Veblen 
John  R.  Commons 


William  O.  Scroggt, 
Frank  A.  Fetter 


CON.TXNTS   FpR^MAY,   1907 


I.  CONCERNING    THE    NATURE    OF  CAPITAL  :"  A    REPLY 

II.  THE    STREET    RAIL-W^y/Q^ESTl!)**   IN   CHICAGO  . 

III.  THE   READJUSTMENT  'o*F  *SAN    DOMINGO'S   FINANCES 

IV.  THE     CONCEPT    OF    AN    ECONOMIC    QUANTITY 

V.     BANK    RESERVES    IN    THE    UNITED   STATES,   CANADA,   AND 
ENGLAND      , 


.  John  Bates  Clark 

John  A.  Fairlit. 

Jacob  H.  Hollander 

.  T.  N.  Carver 


VI.     ENGLISH    FINANCES    UNDER   THE   LONG   PARLIAMENT 

NOTES  AND  MEMORANDA: 

Laws  Regulating  the  Migration  of  Russians  through  Germany 
The  Wisconsin  Tax  Decisions  of  1906 

RECENT  PUBLICATIONS 


,      F.  S.  Mead 
William  O.  Scroggs 

E.  A.  Goldenweiser 
.  T.  S.  Adams 


THE  STREET  RAILWAY   QUESTION 
IN   CHICAGO. 

ON  April  2  the  people  of  Chicago,  by  a  decisive  vote, 
agreed  to  certain  ordinances  which  mark  a  turning-point 
in  the  street  railway  history  of  that  city,  and  provide  at 
least  a  temporary  settlement  to  a  controversy  that  dates 
back  for  more  than  forty  years,  and  has  been  actively 
contested  for  the  past  decade.  The  story  of  thi^kmg- 
continued  struggle  is  important,  not  only  because  Chfcago 
is  the  second  largest  city  in  the  country,  but  also  as  part 
of  the  larger  contest  that  is  being  carried  on,  more  or  less 
openly,  in  most  of  our  American  cities.  And  the  arrange- 
ments in  these  Chicago  ordinances  set  a  new  standard  in 
the  relations  between  street  railway  companies  and  public 
authorities  that  will  have  an  effect  throughout  the  United 
States. 

In  relating  this  story,  it  will  be  necessary,  in  order  to 
understand  some  of  the  most  recent  events,  to  begin  with 
the  earliest  street  railways  in  Chicago.  But  the  early 
history  and  the  first  stages  of  the  more  active  contest  will 
be  discussed  briefly.  The  greater  part  of  this  paper  will 
deal  with  the  events  of  the  past  ten  years,  and  more  par- 
ticularly with  the  final  steps  and  the  terms  of  the  settle- 
ment that  has  been  made.  The  contest  has  important 
political  aspects;  and  to  some  these  have  seemed  more 
important  than  the  transportation  problems.  But  in  this 
account,  while  some  attention  will  be  given  to  the  political 
bearings,  the  emphasis  will  be  laid  on  the  legal,  economic, 
and  administrative  features* 


285858 


372  QUARTERLY  JOURNAL  OF  ECONOMICS 

I. 

The  earliest  attempts  to  furnish  cheap  local  transporta- 
tion in  Chicago,  as  in  other  cities,  was  by  means  of 
omnibuses  operating  on  regular  lines  of  travel.  The  first 
omnibus  line  of  which  there  is  any  record  was  established 
in  1850,  when  the  city  had  a  population  of  28,000,  and  ran 
from  the  business  centre  to  Lincoln  Park.  Other  lines 
were  established  in  the  years  following;  and  by  1855  there 
were  altogether  ten  omnibus  lines  in  operation,  covering 
an  aggregate  distance  of  18^  miles.  At  first  each  line 
was  begun  by  different  managers;  but  in  1855  the  opera- 
tion of  several  lines  was  consolidated  under  the  manage- 
ment of  Franklin  Parmalee  &  Co.  For  a  few  years  more 
the  omnibus  traffic  continued  to  develop;  but  with  the 
opening  of  street  railways  it  rapidly  declined.  By  1861 
only  two  omnibus  lines  were  in  operation;  and  by  1865 
all  had  been  discontinued.1  More  recently  a  few  new  omni- 
bus lines  have  been  established,  but  these  form  a  negligible 
factor  in  the  means  of  passenger  transportation  in  the  city 
of  Chicago. 

A  local  student  has  discovered  a  newspaper  notice  of  a 
local  grant  authorizing  the  construction  of  a  street  railway 
in  Chicago  as  early  as  1854.  And  there  is  official  record 
of  a  council  ordinance  of  1856,  granting  a  street  railway 
franchise.  But  no  action  was  taken  on  either  of  these; 
and  the  latter  was  forfeited  by  the  failure  to  secure  the 
required  consent  of  the  owners  of  adjacent  property. 
The  first  effective  ordinance  for  the  construction  and 
operation  of  street  railways  in  Chicago  was  passed  by  the 
city  council,  August  16,  1858.  As  the  terms  of  this  ordi- 
nance were  involved  in  the  recent  litigation  and  settlement, 
it  is  of  especial  importance  to  understand  its  contents 

1  George  B.  Goodwin,  Chicago  Street  Railways.  A  manuscript  essay  in  the 
possession  of  Professor  J.  H.  Gray,  of  Northwestern  University. 


STREET   RAILWAY   QUESTION   IN  CHICAGO          373 

and  significance.  It  authorized  a  group  of  individuals — 
including  Franklin  Parmalee,  the  head  of  the  partnership 
then  operating  the  principal  omnibus  lines — to  construct 
railway  tracks  on  certain  streets  on  the  south  and  west, 
of  the  Chicago  River,  and  to  operate  cars  thereon  "with 
animal  power  only"  for  a  period  of  twenty-five  years,  and 
until  the  city  should  " elect  to  purchase"  the  plant  and 
equipment.  A  maximum  fare  of  five  cents  was  specified; 
and  the  grantees  were  to  pay  one-third  of  the  cost  of  grad- 
ing and  paving  streets.  The  council  reserved  the  right  to 
regulate  the  rate  of  speed  and  the  time  of  running  cars. 
Under  this  ordinance,  tracks  were  laid,  and  the  first  lin 
opened  in  April,  1859. 

Meanwhile  a  question  had  been  raised  as  to  the  legal 
authority  of  the  city  council  to  grant  such  a  franchise.  To 
settle  these  doubts  and  to  incorporate  the  grantees,  a  special 
act  of  the  Illinois  legislature  was  passed  on  February  16, 
1859,  incorporating  the  grantees  under  the  city  ordinance 
as  the  Chicago  City  Railway  Company,  for  a  period  of 
twenty-five  years,  and  authorizing  the  construction  and 
operation  of  street  railways  upon  terms  and  conditions 
provided  by  the  common  council.  Authority  was  also 
given  to  extend  the  lines  to  any  part  of  Cook  County,  by 
the  exercise  of  the  power  of  eminent  domain,  or  with  the 
assent  of  the  supervisor  of  any  township  for  laying  tracks 
in  the  highways.  The  same  powers  were  granted  to  an- 
other group  of  individuals,  as  the  North  Chicago  City 
Railway  Company,  for  the  north  division  of  the  city  and 
county. 

On  May  23,  1859,  the  council  passed  ordinances  grant- 
ing rights  in  important  streets  to  both  of  these  companies. 
The  ordinance  to  the  Chicago  City  Railway  Company  was, 
in  substance,  a  reaffirmation  of  the  ordinance  of  1858,  on 
the  basis  of  the  act  of  the  legislature.  The  ordinance 
to  the  North  Chicago  City  Railway  Company  for  the  first 


374  QUARTERLY  JOURNAL  OF  ECONOMICS 

time  gave  that  company  rights  in  specified  streets,  and 
differed  from  the  ordinance  of  1858  in  limiting  the  grant 
to  the  term  of  twenty-five  years  "and  no  longer." 

On  February  21,  1861,  the  Illinois  legislature  passed  an 
act  which  incorporated  the  Chicago  West  Division  Rail- 
way Company,  with  the  same  powers  as  the  two  previously 
established  companies,  but  required  the  consent  of  the 
North  Chicago  Company  before  the  construction  of  any 
tracks  in  the  north  division,  and  authorized  the  new 
company  to  acquire  any  of  the  rights  of  the  City  Railway 
Company.  In  the  summer  of  1863  the  City  Railway 
Company  transferred  to  the  West  Division  Company  con- 
trol over  its  lines  in  the  west  division  of  the  city. 

These  measures,  which  form  the  first  stage  in  the  develop- 
ment of  the  street  railway  system  of  Chicago,  have  been 
held  by  the  United  States  Supreme  Court  to  have  estab- 
lished clearly  the  policy  of  municipal  control,  and  in  par- 
ticular to  recognize  the  right  of  the  city  to  fix  the  term 
during  which  the  streets  might  be  occupied  by  street 
railway  companies. 

That  it  was  the  intention  of  the  legislature  to  give  effect  to  the 
right  of  municipal  control  in  the  act  under  consideration  [that  of 
1859]  is  shown  in  its  confirmation  of  terms  already  fixed  by  con- 
tract between  the  city  and  the  companies.  As  to  the  future,  com- 
panies were  to  have  no  right  to  the  use  and  occupancy  of  the 
streets  until  they  should  obtain  from  the  city  council  authority 
to  that  end,  under  contracts  to  be  agreed  upon  as  to  terms  and 
conditions.  A  more  comprehensive  plan  of  securing  the  city  in 
the  control  of  the  use  of  the  streets  for  railwa}^  purposes  could 
hardly  be  devised. 

It  thus  clearly  appears,  at  least  up  to  the  passage  of  the  act 
of  1865,  that  legislation  upon  the  subject  recognized  and  enforced 
the  right  and  authority  of  the  city  to  fix  the  term  during  which 
the  streets  might  be  occupied  by  street  railway  companies.  The 
legislature  had  confirmed  the  ordinance  of  the  city  fixing  the 
term  at  twenty-five  years  and  until  the  city  should  see  fit  to  pur- 


STREET   RAILWAY  QUESTION  IN  CHICAGO        375 

chase  the  property  of  the  railway  company.  It  had  required  the 
companies  to  obtain  the  authority  of  the  city  before  using  the 
streets,  such  use  to  be  upon  terms  and  conditions,  and  with  such 
rights  and  privileges  as  the  city  had  or  might  thereafter  prescribe 
by  contract  with  the  companies.1 

From  time  to  time  the  council  passed  other  ordinances 
authorizing  new  lines  of  railway  tracks  and  making  minor 
changes  in  previous  grants.  In  most  cases  these  ordi- 
nances contained  a  definite  time  limit.  Under  them  ad- 
ditional lines  were  built;  and  by  1865  there  were  forty 
miles  of  street  railways  in  the  city. 

In  that  year  another  act  dealing  with  horse  railways 
in  Chicago  was  passed  by  the  legislature,  which  vitally 
affected  the  situation,  laid  the  basis  for  the  extreme  claims 
of  the  companies  in  the  recent  litigation,  and  more  than 
anything  else  has  been  responsible  for  the  long  agitation 
in  reference  to  street  railways  in  that  city.  This  act, 
passed  in  February  6, 1865,  was  amendatory  of  the  previous 
acts  of  1859  and  1861.  It  clearly  extended  the  corporate 
lines  of  the  companies  to  a  period  of  ninety-nine  years  from 
the  dates  of  the  original  acts.  It  also  added  to  the  section 
authorizing  the  construction  and  operation  of  railways 
on  the  terms  provided  by  the  council  the  following  con- 
fused and  ambiguous  clause, — 

and  any  and  all  acts  or  deeds  of  transfer  of  rights,  privileges,  or 
franchises,  between  the  corporations  in  said  several  acts  named, 
or  any  two  of  them,  and  all  contracts,  stipulations,  licenses,  and 
undertakings,  made,  entered  into,  or  given;  and  as  made  or 
amended  by  and  between  the  said  common  council  and  any  one  or 
more  of  the  said  corporations,  respecting  the  location,  use  or  exclu- 
sion of  railways  in  or  upon  the  streets  or  any  of  them,  of  said  city, 
shall  be  deemed  and  held  and  continued  in  force  during  the  life 
hereof  as  valid  and  effectual,  to  all  intents  and  purposes,  as  if 
made  a  part,  and  the  same  are  hereby  made  a  part  of  said  several 
acts. 

*  Blair  v.  Chicago,  201  U.  S.  400. 


376  QUARTERLY  JOURNAL  OF  ECONOMICS 

Before  this  measure  was  enacted,  it  was  strongly  opposed 
in  the  city  of  Chicago,  and  a  petition,  signed  by  9,000 
citizens,  was  presented  against  its  passage.  When  the 
bill  reached  Governor  Oglesby,  he  refused  to  sign  it,  and 
returned  it  to  the  legislature  with  a  vigorous  message  in 
opposition.  But  the  plans  of  the  companies  had  been 
well  laid,  and  the  bill  was  promptly  passed  over  the  gov- 
ernor's veto,  by  a  vote  of  18  to  5  in  the  Senate  and  55 
to  23  in  the  House. 

Under  this  act  the  companies  have  claimed  that  their 
franchises  were  extended  to  a  period  of  ninety-nine  years 
from  1859  and  1861.  And  they  asserted  this  claim,  not 
only  in  reference  to  grants  made  before  the  passage  of 
the  act  of  1865,  but  also  in  reference  to  subsequent  grants. 
On  the  other  hand,  the  city  always  denied  the  validity  of 
these  claims.  But  for  forty  years  the  matter  was  not 
brought  into  the  courts  where  the  precise  effect  of  the 
act  could  receive  a  judicial  interpretation. 

However  the  act  of  1865  might  be  interpreted,  the  pro- 
test against  its  obvious  intent  to  assert  the  authority  of 
the  legislature  in  local  matters  soon  led  to  a  return  to  the 
earlier  policy  of  local  control  and  short-term  franchises. 
The  new  Constitution  of  Illinois,  adopted  in  1870,  contained 
a  provision  prohibiting  the  legislature  from  granting  street 
railway  rights  in  any  city,  town,  or  incorporated  village 
without  requiring  the  consent  of  the  local  authorities. 
This  policy  was  continued  in  the  general  act  of  1872  for 
the  incorporation  of  cities,  which  required  all  street  rail- 
way franchises  granted  thereafter  to  be  limited  to  twenty 
years.  This  provision  became  applicable  to  Chicago  when 
that  city  adopted  the  act  in  1875.  The  same  end  had 
been  secured  by  a  provision  in  the  Horse  and  Dumny 
Act  of  1874,  also  limiting  future  street  railway  grants  to 
twenty  years.  And  various  franchises  were  granted  from 
time  to  time  under  these  acts  for  the  further  extension 
of  the  Chicago  street  railways. 


STREET  RAILWAY  QUESTION  IN  CHICAGO        377 

Under  the  provisions  of  the  first  ordinances  and  legisla- 
tive acts,  the  grants  made  in  1858  should  have  expired, 
or  at  least  have  been  terminable  in  1883.  At  that  time 
the  questions  were  extensively  discussed,  and,  if  claims 
had  been  pressed  either  by  the  city  or  the  companies, 
a  determination  might  have  been  reached.  The  Citizens' 
Association  appointed  a  committee  to  investigate  the 
matter.  Two  of  the  three  members  reported  that  the 
original  contract  made  by  the  city  in  1858  was  ultra  vires 
and  void,  and  that  the  companies  held  their  rights  under 
the  act  of  1865.  The  third  member  (George  F.  Harding) 
argued  that  the  act  of  1859  had  confirmed  the  grants  made 
the  year  before,  and  that  the  act  of  1865  simply  extended 
the  lives  of  the  corporations,  holding  that  any  extension 
of  the  franchises  provided  by  the  act  was  void  as  an  im- 
pairment of  the  contract  previously  made. 

In  view  of  these  circumstances  a  temporary  compromise 
was  effected.  The  city  council  in  July,  1883,  passed  an 
ordinance  extending  the  term  of  all  existing  franchises  for 
twenty  years,  and  providing  that  neither  this  grant  nor 
its  acceptance  by  the  companies  should  alter  the  existing 
rights,  duties,  and  obligations  of  either  party.  By  this 
means  the  controversy  over  the  ninety-nine  year  act  was 
postponed  until  the  expiration  of  this  grant  in  1903. 
In  this  same  year  (1883)  a  new  company,  the  Chicago 
Passenger  Railway  Company,  had  been  incorporated  and 
received  franchises  for  twenty  years  to  build  and  operate 
additional  lines  on  the  west  side. 


II. 

Until  1880  the  street  railways  of  Chicago  had  been 
operated  with  horses,  and  the  business  developed  had  not 
been  sufficient  to  attract  the  attention  of  large  financial 


378  QUARTERLY  JOURNAL  OF  ECONOMICS 

promoters.  But  soon  after  this  date  there  was  introduced, 
first,  cable  traction,  and,  later,  electric  power.  These 
changes  of  motive  power  were  made  without  any  new  grant 
from  the  city  council  or  the  legislature,  altho  the  earlier 
franchises  had  been  given  distinctly  for  railways  to  be 
operated  only  by  animal  power.  And  in  connection  with 
the  new  methods  of  traction  and  the  reconstruction  of 
the  lines  there  appeared  on  the  scene  new  managers,  new 
financial  interests,  and  striking  methods  of  speculative 
financiering. 

J  Cable  traction  was  first  established  in  1881  on  the  most 
important  lines  of  the  City  Railway  Company  on  the  south 
side.  In  a  few  years  a  large  proportion  of  the  lines  of  this 
company  had  been  converted  to  the  new  system.  After 

V  1890,  electric  power  was  introduced  on  many  of  the  lines. 
In  connection  with  these  improvements  large  issues  of 
stocks  and  bonds  were  made  from  time  to  time.  In  1880 
the  total  capital  liabilities  had  been  $1,500,000  in  stock. 
By  1897  there  were  outstanding  $16,600,000  in  stock  and 
bonds,  against  which  the  plant  and  equipment  on  the 
books  of  the  company  represented  an  investment  of  about 
$11,600,000.1 

But  these  transactions  appear  small  in  comparison  with 
those  for  the  north  and  west  side  lines.  Here  the  original 
companies  were  dilatory  in  taking  steps  to  introduce  the 
new  methods,  and  no  active  steps  were  taken  until  1886. 

V  Beginning  in  that  year,  Mr.  Charles  T.  Yerkes,  a  broker 
who  had  recently  come  to  Chicago  from  Philadelphia, 
with  the  assistance  of  Messrs.  Elkins  and  Widener  and 
other  Philadelphia  capitalists,  secured  control  of  a  majority 
of  the  stock  of  the  North  Chicago  and  West  Division 
Companies.  Two  new  companies  were  organized  which 
leased  the  lines  of  the  original  companies  and  also  those 
of  the  Chicago  Passenger  Railway.  New  securities  were 

1  Report  of  Investigation  by  the  Civic  Federation  in  Municipal  Affairs,  vol.  v. :  439. 


STREET  RAILWAY  QUESTION  IN  CHICAGO        379 

issued,  and  physical  improvements,  reconstruction,  and 
extensions  were  carried  out.  As  a  result,  at  the  end  of 
ten  years  (in  1897)  the  total  capital  liabilities  of  the  northi 
and  west  side  lines  had  been  increased  from  less  than. 
$8,000,000  l  to  $58,700,000.  The  cost  value  of  the  plant! 
and  equipment  at  the  latter  date,  according  to  the  books 
of  the  companies,  was  $29,750,000,  and  this  included  a 
large  profit  to  inside  construction  companies  formed  by 
the  leading  capitalists  controlling  the  companies  owning 
and  operating  the  lines. 

Combining  the  financial  operations  of  all  these  com- 
panies, the  total  capital  liabilities  had  been  increased  from 
$9,500,000  to  more  than  $75,000,000  in  1897,  while  the 
original  cost  of  construction  had  been  but  little  over 
$40,000,000.2 

In  carrying  out  his  extensive  schemes,  Mr.  Yerkes  had 
deemed  it  advisable  to  exercise  an  active  but,  so  far  as 
possible,  a  secret  influence  in  political  affairs.  He  became 
the  dominant  factor  in  nominating  conventions,  and  had 
control  over  both  city  and  State  governments,  so  far  at 
least  as  his  business  interests  were  concerned.  And  the 
period  of  his  dominance,  in  the  early  nineties,  marks  the 
deepest  degradation  of  both  the  city  council  of  Chicago 
and  the  State  legislature  of  Illinois.  His  success  up  to 
this  point  encouraged  him  to  enter  on  more  far-reaching 
plans.  But  these  very  plans  served  at  last  to  arouse  the 
public  opinion  of  the  community  and  to  inaugurate  an 
effective  movement  for  the  betterment  of  political  con- 
ditions both  in  city  and  State. 

In  1895  bills  were  introduced  and  passed  in  the  legis- 
lature to  confer  new  franchise  rights  more  valuable  than 
could  be  granted  by  the  council.  These  were,  however, 
blocked  by  the  veto  of  Governor  Altgeld.  Two  years  later, 

1  Even  this  was  much  in  excess  of  the  cost  of  construction  up  to  that  time. 

2  Op.  cit. 


380  QUARTERLY  JOURNAL  OF  ECONOMICS 

with  a  more  pliant  governor  in  the  executive  chair,  the 
attempt  was  renewed.    A  series  of  bills  known  as  the 

/Humphrey  Bills  were  introduced,  comprising  franchises 
for  fifty  years  with  no  safeguards  for  the  public  interests 
and  no  compensation  for  what  were  now  clearly  seen  to  be 
privileges  of  immense  financial  value.  But  public  senti- 
ment in  Chicago  was  now  thoroughly  aroused,  and  was 
vigorously  expressed  in  a  series  of  public  meetings.  The 
protests  were  carried  to  the  legislature,  and  were,  in  part, 
effective  by  preventing  the  passage  of  the  original  bills. 
There  was  enacted,  however,  with  the  approval  of  the 

//governor,  the  Allen  Law,  authorizing  city  councils  to 
grant  street  railway  franchises  for  fifty  years'  periods  and 
in  other  ways  strengthening  the  position  of  the  com- 
panies.1 

A  short  time  before  this  the  city  council  of  Chicago 
would  have  readily  granted  franchises  under  the  Allen 
Law.  But  in  1896  the  Municipal  Voters'  League  had  been 
organized,  and  had  already  improved  the  general  character 
of  the  council  by  securing  the  election  of  better  men. 
Other  members  who  might  have  been  subject  to  improper 

''-influences  knew  that  their  actions  were  more  closely 
watched  than  formerly.  The  attitude  of  Mayor  Carter 
Harrison,  Jr.,  in  opposition  to  any  grant  under  the  Allen 
Law,  also  aided  in  preventing  any  action.  Not  only  was 
no  grant  made,  but  it  was  clearly  indicated  that  no  further 
grants  would  be  made  until  that  law  was  repealed.  In  the 
legislative  elections  of  1898  the  vote  on  the  Allen  Law 
was  made  an  issue  in  many  districts,  and  a  large  number 
of  members  who  had  voted  for  the  law  were  defeated  for 
renomination  or  re-election.  And  the  law  was  promptly 
repealed  by  the  legislature  of  1899. 

At  the  April  municipal  election  of  1899,  following  the 
repeal  of  the  Allen  Law,  Mayor  Harrison  was  re-elected 

1 J.  H.  Gray,  Quarterly  Journal  of  Economics,  October,  1897. 


STREET  RAILWAY  QUESTION  IN  CHICAGO        381 

for  a  second  term;  and,  mainly  through  the  work  of  the 
Voters'  League,  the  council  had  now  a  clear  majority  of 
members  that  could  be  trusted  to  vote  against  any  fran- 
chise that  did  not  protect  the  interests  of  the  community. 
Under  these  circumstances,  Mr.  Yerkes  decided  to  retire. 
The  Chicago  Union  Traction  Company  was  organized  byj 
the  Elkins-Widener- Whitney  syndicate,  which  took  over 
Mr.  Yerkes's  holdings  and  entered  into  new  leases  with  the 
underlying  companies  to  operate  both  the  north  and 
west  side  lines.  This  eliminated  Mr.  Yerkes  from  the 
situation,  but  the  process  of  financial  manipulation  con- 
tinued. 

At  the  same  time  the  companies  definitely  adopted 
the  policy  of  refusing  to  make  further  improvements 
in  the  service  on  the  ground  that  capital  could  not 
be  secured  without  additional  franchises.  The  cable  lines 
were  clearly  antiquated,  the  track  and  rolling  stock  were 
allowed  to  deteriorate,  with  the  obvious  purpose  of  forcing 
the  grant  of  a  new  franchise  on  terms  to  be  dictated  by  the 
companies.  Later  events  showed  clearly  that  there  was  no 
justification  for  the  plea  that  improvements  could  not  be 
made  without  new  grants.  For  in  two  of  the  three  divi- 
sions of  the  city  the  companies,  under  their  original  fVan- 
chises,  could  not  be  dispossessed  until  they  were  paid  full 
value  for  their  plant  and  equipment.  Moreover,  the  com- 
panies maintained  at  the  same  time  their  claims  under 
the  ninety-nine  year  act,  and  on  the  basis  of  these  claims 
and  the  constantly  increasing  traffic  were  actively  engaged 
in  floating  new  securities  and  piling  up  the  obligations 
on  their  rapidly  deteriorating  equipment.  An  elaborate 
investigation,  made  under  the  direction  of  the  Civic  Federa- 
tion in  1901,  showed  that  the  aggregate  capital  liabilities 
of  the  companies  had  then  a  face  value  of  $117,000,000 
and  a  market  value  of  $120,000,000,— an  increase  of  more 
than  $40,000,000  since  1897.  At  the  same  time  the 


382  QUARTERLY  JOURNAL  OF  ECONOMICS 

original  cost  value  of  assets  was  $56,000,000,or  $15,000,000 
more  than  in  1897.  Making  conservative  allowances  for 
depreciation,  the  market  value  of  the  assets  was  but 
$45,840;000;  and,  if  the  inter-company  obligations  repre- 
senting no  physical  property  were  deducted,  the  net  value 
of  the  physical  property  was  only  $34,750,000.1 


III. 

In  the  early  stages  of  the  contest  with  Mr.  Yerkes  and 
the  companies,  the  energies  of  public-spirited  citizens  and 
the  local  authorities  had  been  directed  to  the  negative 
task  of  defeating  the  plans  of  the  former  for  extending  and 
making  more  secure  their  control  over  the  local  transporta- 
tion service  and  the  political  situation.  The  development 
of  a  constructive  policy  was  a  task  of  even  greater  difficulty, 

V  and  one  that  has  taken  a  good  many  years  to  bring  to  its 
present  outcome.  The  first  step  in  this  direction  was  the 
appointment  by  the  council,  late  in  1897,  of  a  special  com- 
mittee to  collect  and  collate  information  on  the  subject 

^  of  street  railways.  This  committee  in  March  of  the  fol- 
lowing year  submitted  a  detailed  report  on  the  franchises, 
operations,  and  finances  of  the  various  companies,  and  on 
the  wages  of  employees  and  the  conditions  of  employment. 
It  made  no  specific  recommendations;2  but,  nevertheless, 
this  report,  known  as  the  Harlan  report,  from  Alderman 
John  Maynard  Harlan,  the  first  member  of  the  committee, 
forms  the  starting-point  for  the  policy  later  developed. 

Another  step  was  taken  in  December,  1899,  when  the 
city  council  passed  resolutions  creating  a  Street  Railway 
Commission,  which  was  in  fact  a  committee  of  the  council 

1  M.  R.  Maltbie,  in  Municipal  Affairs,  vol.  v.  p.  450. 

2  Report  of  the  Special  Committee  of  the  City  Council  of  Chicago  on  Street  Railway 
Franchises  and  Operations,  March  28,  1898. 


STREET  RAILWAY  QUESTION  IN  CHICAGO        383 

to  examine  the  feasibility  of  municipal  ownership  of  street 
railways  and  also  the  terms  and  conditions  on  which  new 
franchises  might  be  granted.  This  Commission,  of  which 
Alderman  Milton  J.  Foreman  was  chairman,  submitted 
its  report  in  December,  1900,  known  commonly  in  Chicago 
as  the  Sikes  report,  from  Mr.  George  C.  Sikes,  the  Secretary 
of  the  Commission.  This  report  favored,  among  other 
things,  the  unification  of  management  of  all  street  railways 
in  the  city,  the  prohibition  of  overcapitalization,  publicity 
hi  the  conduct  of  the  business,  and  the  reservation  of  broad 
powers  of  control  by  the  city  in  any  future  franchises.  It 
also  urged  that  the  city  should  secure  from  the  legislature 
an  enabling  act  authorizing  municipal  ownership,  as  a 
reserve  power  to  place  the  city  in  a  better  position  to  make 
terms  with  private  corporations.1  A  bill  to  carry  out 
these  recommendations  was  submitted  with  the  report, 
providing  for  a  popular  referendum  on  street  railway 
franchises,  authorizing  municipal  ownership,  and — after 
a  referendum  vote — municipal  operation.  The  bill  was 
introduced  in  the  legislature  in  1901,  but  was  not  re- 
ported by  the  committees  of  either  House. 

Carrying  out  one  of  the  recommendations  of  the  Com- 
mission, the  city  council  in  1901  created  a  special  Com- 
mittee on  Local  Transportation.  After  the  election  of 
April,  1901 ,2  this  committee  was  made  a  permanent 
standing  committee;  and  this  committee,  with  changes 
in  its  membership  from  time  to  time,  has  had  charge 
of  the  subsequent  development  of  the  municipal 
policy.  As  a  result  of  its  first  year's  work,  the  com- 
mittee formulated  and  submitted  to  the  council  an 
outline  of  the  provisions  that  should  be  included  in  any 
franchise  renewral  ordinance.  This  outline  specified  that 

1  Report  of  the  Street  Railway  Commission  to  the  City  Council  of  Chicago,  Decem- 
ber, 1900. 

2  At  which  Mayor  Harrison  was  elected  for  a  third  term. 


384  QUARTERLY  JOURNAL  OF  ECONOMICS 

such  a  franchise  should  be  granted  for  twenty  years,  with  a 
proviso  that  the  city  might  purchase  at  any  time  after  the 
expiration  of  the  first  ten  years  of  the  grant.  It  further 
provided  that  the  companies  should  waive  absolutely  all 
claims  under  the  ninety-nine  year  act.  And  it  reserved 
to  the  city  council  large  powers  of  control,  and  required 
the  construction  of  underground  trolley  lines  in  the  business 
centre  of  the  city.  Nothing  definite,  however,  was  accom- 
plished. The  companies  were  not  ready  to  accept  these 
terms.  And  the  city  authorities  were  also  willing  to  wait 
until  the  expiration  of  the  twenty-year  extension  ordinance 
in  1903. 

While  the  official  authorities  of  the  city  were  thus  pre- 
paring for  a  renewal  of  the  franchises,  popular  sentiment 
was  advancing  more  rapidly  in  favor  of  the  policy  of 
municipal  ownership.  And  the  strength  of  this  sentiment 
was  clearly  shown  at  a  popular  referendum  in  April,  1902. 
This  vote  was  taken  under  an  Illinois  statute  of  1901, 
known  as  the  Public  Opinion  Law,  under  which,  on  petition 
of  25  per  cent,  of  the  registered  voters,  questions  of  public 
policy  may  be  submitted  to  popular  vote.  These  votes 
have  no  legal  binding  effect,  but  are  merely  an  indication 
of  popular  opinion.  Before  the  spring  election  of  1902 
the  Referendum  League  secured  the  required  number  of 
signatures  to  a  petition  calling  for  a  vote  on  the  questions 
of  municipal  ownership  of  street  railways  and  lighting 
plants  and  the  direct  nomination  of  candidates  for  city 
officers.  At  the  election  the  total  vote  cast  for  city 
officers  was  about  200,000,  or  a  little  more  than  half  of 
the  vote  cast  at  the  preceding  Presidential  election.  The 
vote  on  the  questions  of  public  policy  was  about  170,000, 
and  was  about  seven  to  one  in  the  affirmative  on  each  of 
the  three  propositions.  In  regard  to  municipal  owner- 
ship of  street  railways  the  actual  vote  was  142,826  in 
favor  and  27,998  against. 


STREET  RAILWAY  QUESTION  IN  CHICAGO        385 

There  has  been  much  difference  of  opinion  as  to  the 
significance  of  this  vote.  On  its  face  it  indicated  an  over- 
whelming popular  demand.  But  it  has  been  pointed  out 
that  the  vote  in  favor  of  municipal  ownership  represented 
little  more  than  a  third  of  the  total  registered  voters,  and 
it  has  also  been  urged  that  it  simply  expressed  the  general 
hostility  to  the  traction  companies  that  had  been  aroused 
by  their  poor  service  and  policy  of  exploitation.  How- 
ever the  vote  may  be  interpreted,  there  can  be  no  question 
that  it  gave  a  renewed  impetus  to  the  demand  for  an  act 
authorizing  municipal  ownership.  To  this  end  efforts 
were  next  directed,  and  in  these  efforts  there  were  united 
both  those  who  favored  the  actual  establishment  of  a 
municipal  system  and  those  who  desired  the  authority 
as  a  means  of  negotiating  with  the  companies. 

At  the  beginning  of  the  legislative  session  of  1903  the 
prospects  for  any  legislation  opposed  by  the  street  railway 
companies  were  far  from  bright.  Especially  in  the  organi- 
zation of  the  House  of  Representatives,  the  election  of 
speaker,  and  the  appointment  of  the  Committee  on  Trans- 
portation, it  was  indicated  that  the  street  railway  com- 
panies were  working  in  harmony  with  William  C.  Lorimer, 
the  boss  of  the  Republican  machine  in  Chicago,  and  with 
Governor  Yates.  Nevertheless,  it  was  decided  to  make  the 
attempt.  An  agreement  was  reached  to  support  a  measure 
drafted  by  Walter  L.  Fisher,  secretary  of  the  Municipal 
Voters'  League,  and  introduced  by  Senator  Miiller,  after 
whom  it  was  named.  This  bill  was  strongly  supported, 
not  only  by  Mayor  Harrison  and  the  city  council,  but 
also  by  Graeme  Stewart,  Republican  candidate  for  mayor 
in  the  election  campaign  of  that  spring,  by  John  Maynard 
Harlan,  who  had  been  Mr.  Stewart's  active  opponent  for 
the  nomination,  by  the  Voters'  League  and  other  organi- 
zations, and  by  the  newspaper  press  of  Chicago,  with  the 
exception  of  the  Inter-Ocean,  which,  it  was  known,  had 


386  QUARTERLY  JOURNAL  OF  ECONOMICS 

been  purchased  by  the  street  railway  interests.  As  a 
result  of  this  influence,  the  Miiller  bill  passed  the  Senate 
immediately  after  the  municipal  election  in  April; *  but 
it  seems  to  have  been  clearly  the  intention  to  defeat  the 
measure  in  the  House. 

The  contest  culminated  in  a  dramatic  situation  of  the 
highest  intensity.  The  House  Committee  on  Transpor- 
tation, to  which  the  Miiller  bill  was  referred,  prepared  a 
substitute  measure,  and  a  strong  effort  was  made  to  induce 
at  least  some  of  the  Chicago  supporters  of  the  Miiller  bill 
to  accept  this  substitute.2  When  this  offer  was  refused, 
the  House  leaders  decided  to  resort  to  extreme  measures, 
as  it  was  known  that  the  Democrats  in  the  House  would 
unite  with  the  Independent  Republicans  in  favor  of  the 
Senate  bill.  The  House  Committee  presented  its  substi- 
tute report,  and,  in  the  face  of  a  demand  for  a  roll-call 
from  two-thirds  of  the  members,  the  speaker  put  a  series 
of  motions,  and  declared  them  carried,  whereby  the  sub- 
stitute bill  was  recorded  as  having  passed  its  third  reading. 
Had  this  result  stood,  a  conference  committee  would  have 
been  necessary;  and  so  near  was  the  end  of  the  session 
that  either  the  substitute  bill  or  no  legislation  would  have 
been  enacted. 

But  the  party  leaders  had  overreached  themselves. 
When,  thru  fear  of  personal  violence,  the  speaker 
declared  the  House  adjourned,  and  retired  in  haste  to 
consult  with  the  governor  and  his  friends,  ninety-seven  of 
the  one  hundred  and  fifty-three  members  of  the  House 
remained  in  their  places,  and,  forming  a  temporary  organi- 
zation, agreed  that  the  appropriation  bills  should  not  be 
passed,  and  no  tether  legislative  business  should  be  trans- 

1  Mayor  Harrison  was  re-elected  for  a  fourth  term. 

2  There  was  no  opportunity  for  a  study  of  this  substitute  bill,  but  it  was  obvi- 
ously intended  to  defeat  the  effective  provisions  of  the  Muller  bill,  and  probably 
contained  clauses  that  would  have  greatly  strengthened  the  position  of  the  com- 
panies. 


STREET  RAILWAY  QUESTION  IN  CHICAGO        387 

acted  until  the  speaker  should  retrace  his  actions.  The 
speaker  was  forced  to  capitulate,  a  reconsideration  was 
taken,  and  the  Miiller  bill  was  passed.  The  governor  did 
not  venture  to  refuse  his  signature.1 

The  Miiller  law2  is  a  general  act  authorizing  any  city 
in  the  State  to  own  and  operate  street  railways  under  the 
conditions  prescribed.  The  act  is  of  special  significance, 
because,  in  addition  to  the  formal  grant  of  authority,  there 
is  a  careful  attempt  to  provide  a  satisfactory  method  for 
meeting  the  serious  financial  difficulties  involved  in  the 
policy  of  municipal  ownership,  so  that  the  grant  of  power 
may  be  effectively  used  by  any  city  which  considers  it 
advisable  to  make  use  of  the  authority. 

Before  any  of  the  powers  conferred  can  be  exercised, 
the  act  must  first  be  adopted  by  popular  referendum  in 
the  city  concerned,  while  additional  referendum  votes 
must  be  taken  in  reference  to  various  special  features  of 
the  law.  The  authority  given  is  "to  construct,  acquire, 
purchase,  maintain,  and  operate  street  railways  within  the 
corporate  limits";  and  franchises  granted  before  this 
power  is  acted  on  may  contain  a  reservation  of  the  right 
on  the  part  of  the  city  to  take  over  the  plant  at  some 
future  time.  Two  methods  are  authorized  for  securing 
funds  for  purchasing  or  constructing  municipal  railways. 
General  city  bonds  may  be  issued,  provided  the  proposition 
is  submitted  to  popular  vote  and  is  approved  by  two- 
thirds  of  those  voting;  but  debt  limits  are  almost  certain 
to  prevent  this  method  from  being  adopted.  The  other 
alternative — and  this  is  the  most  striking  feature  of  the 
act — is  to  issue  street  railway  certificates,  secured  by  a 
mortgage  on  the  plant,  giving  the  mortgagee  in  case  of 
foreclosure  the  right  to  maintain  and  operate  the  railway 
for  a  period  of  not  more  than  twenty  years.  Any  orcli- 

1  Atlantic  Monthly,  January,  1904. 

2  Session  Laws,  1903,  p.  285  (May  18). 


388  QUARTERLY  JOURNAL  OF  ECONOMICS 

nance  providing  for  such  certificates  must,  however,  be 
submitted  to  popular  vote  and  be  approved  by  a  majority 
of  those  voting  on  the  question.  It  is  expected  that  such 
certificates  will  not  be  considered  as  part  of  the  city  debt, 
to  be  included  within  the  debt  limits  established  by  the 
State  constitution. 

When  a  city  has  secured  a  street  railway,  it  may  operate 
it  under  direct  municipal  management  only  if  that  policy 
is  also  approved  at  a  popular  referendum  by  three-fifths 
of  those  voting.  In  lieu  of  this  the  city  may  lease  any 
municipal  railway  for  a  period  of  not  over  twenty  years. 
But  any  ordinance  authorizing  a  lease  to  a  private  com- 
pany for  more  than  five  years  must  be  submitted  to  a 
popular  referendum  on  the  petition  of  10  per  cent,  of  the 
voters. 

In  July,  1903,  the  twenty  years'  extension  provided  by 
the  ordinance  of  1883  expired.  But,  as  no  new  agree- 
ment had  been  reached  at  that  time  and  the  city  was  not 
yet  in  a  position  to  act  under  the  Miiller  law,  the  various 
companies  remained  in  possession,  and  there  was  no  practi- 
cal change  in  the  situation.  Indeed,  steps  had  been  taken 
in  the  courts  which  prevented  the  city  from  taking  any 
aggressive  action  to  oust  the  companies.  On  April  22, 
1903,  the  Guaranty  Trust  Company  of  New  York  brought 
suit  in  the  United  States  Circuit  Court  against  the  Union 
Traction  Company  and  other  north  and  west  side  com- 
panies; and,  judgment  being  given  and  no  property  found, 
the  roads  were  placed  in  the  hands  of  receivers.  These 
companies  had  been  in  financial  difficulties  for  some  time, 
as  a  result  of  the  reckless  issue  of  speculative  securities. 
But  it  has  been  alleged  that  the  suit  was  a  collusive  action 
for  the  purpose  of  having  the  claims  of  the  companies 
under  the  ninety-nine  years'  act  adjudicated  in  the  United 
States  courts  rather  than  in  the  courts  of  Illinois.  And, 
at  any  rate,  this  result  was  secured.  On  July  18  the 


STREET  RAILWAY  QUESTION  IN  CHICAGO       389 

receivers  appointed  by  the  court  began  proceedings  be- 
fore the  United  States  Circuit  Court  to  determine  the 
rights  of  the  companies  under  the  acts  of  1859,  1861,  and 
1865. 

At  the  April  election  hi  1904  the  Miiller  Law  was 
adopted  by  the  city  of  Chicago  by  a  vote  of  153,000 
30,000.  At  the  same  time  two  questions  of  public  policy 
bearing  on  the  traction  situation  were  submitted,  with  the 
following  result : — 

1.  Shall  the  city  council  upon  the  adoption  of  the  Miiller 
Law  proceed  without  delay  to  acquire  the  ownership  of 
the  street  railways  under  the  powers  conferred  by  the 
Miiller  Law? 

Yes,  121,957;  no,  50,807. 

2.  Shall  the  city  council  instead  of  granting  any  franchises 
proceed  at  once  under  the  city's  police  power  and  other 
existing  laws   to   license  the   street   railway   companies 
until  municipal  ownership  can  be  secured,  and  compel 
them  to  give  satisfactory  service? 

Yes,  120,863;  no,  48,200. 

It  should  be  noted  that,  while  both .  questions  carried 
by  a  vote  of  more  than  two  to  one,  the  vote  in  favor 
of  municipal  ownership  showed  a  falling  off  from  the 
first  vote  in  1902,  while  the  vote  on  the  other  side  had 
increased. 

Meanwhile  the  Local  Transportation  Committee  has 
continued  negotiations  with  the  City  Railway  Company, 
and  in  August,  1904,  reported  a  tentative  ordinance  in 
regard  to  the  lines  of  that  company  on  the  south  side  of 
the  city.  According  to  this  measure  the  claims  of  the 
company  under  the  ninety-nine  year  act  were  to  be  com- 
muted by  allowing  them  to  continue  in  possession  for 
thirteen  years,  after  which  all  their  grants  were  to  expire. 
Provisions  were  made  for  the  immediate  reconstruction  of 
the  lines,  for  extensions,  and  for  improvements  hi  service, 


390  QUARTERLY  JOURNAL  OF  ECONOMICS 

including  transfers  from  the  lines  of  one  company  to  an- 
other and  some  thru  routes.  The  city  was  to  receive 
5  per  cent,  of  the  gross  receipts  as  compensation  for  the 
use  of  the  streets,  in  addition  to  all  regular  taxes  on  the 
property  and  franchises. 

While  this  proposed  ordinance  was  being  discussed 
in  the  council,  Judge  Grosscup,  of  the  United  States 
Circuit  Court  gave  his  decision  in  the  cases  concerning  the 
north  and  west  side  lines,  substantially  upholding  the 
claims  of  the  companies  that  all  grants  made  before  1875 
were  valid  until  1958.  An  appeal  was  at  once  taken  to 
the  United  States  Supreme  Court.  But  the  preliminary 
decision  made  the  City  Railway  Company  less  disposed  to 
accept  the  compromise  in  the  tentative  ordinance.  At 
the  same  time  the  popular  agitation  in  favor  of  municipal 
ownership  was  steadily  increasing.  And,  as  a  result,  the 
winter  of  1904-05  passed  with  no  definite  advance  towards 
a  settlement  of  the  situation. 


IV. 

In  the  municipal  campaign  of  1905  the  street  railway 
question  was  even  more  prominent  than  in  previous  elec- 
tions, and  was,  in  fact,  the  one  dominant  issue.  The 
Republicans  nominated  for  mayor  John  M.  Harlan,  for- 
merly an  opponent  of  the  bosses  of  the  old  party  machine 
and  a  leader  in  the  council  in  the  earlier  stages  of  the  con- 
test with  the  companies.  At  the  outset  of  the  campaign 
he  seemed  to  favor  the  adoption  of  the  tentative  ordi- 
nance, as  a  step  towards  effective  ultimate  municipal 
ownership  at  the  end  of  the  thirteen  years.  But  before 
the  end  of  the  campaign  he  had  spoken  more  definitely  in 
favor  of  earlier  action.  The  Democrats,  abandoning  the 
more  conservative  policy  followed  by  Mayor  Harrison  in 


STREET  RAILWAY  QUESTION  IN  CHICAGO        391 

harmony  with  the  Republican  council,  nominated  for 
mayor  Judge  E.  F.  Dunne  on  a  platform  calling  for 
immediate  municipal  ownership  and  operation.  This, 
it  was  promised,  could  be  inaugurated  by  using  the  lines 
where  the  franchises  had  clearly  expired;  and,  in  the  case  of 
franchises  which  might  be  held  valid,  either  by  condem- 
nation proceedings  or  by  building  new  lines  parallel  to 
those  covered  by  unexpired  franchises. 

As  the  outcome,  Judge  Dunne  was  elected  by  a  majority 
of  20,000.  At  the  same  time  three  more  public  policy 
votes  were  taken,  which  again  indicated  on  their  face  the 
strong  popular  sentiment  against  any  continuation  of  the 
franchise  policy.  These  were  as  follows: — 

1.  Shall  the  city  council  pass  the  tentative  ordinance? 
Yes,  64,391;  no,  150,785. 

2.  Shall  the  city  council  pass  any  ordinance  granting  a 
franchise  to  the  City  Railway  Company? 

Yes,  60,020;  no,  151,974. 

3.  Shall  the  city  council  pass  any  ordinance  granting  a 
franchise  to  any  street  railroad  company? 

Yes,  59,013;  no,  152,135. 

It  soon  became  clear  that  there  would  be  little  active 
co-operation  between  Mayor  Dunne  and  the  city  council. 
The  council  had  a  Republican  majority;  but  this  was  not  of 
especial  significance,  as  a  number  of  Republican  members 
favored  the  mayor's  policy.  On  the  other  hand,  a  number 
of  Democratic  members  were  not  in  favor  of  immediate 
municipal  ownership  and  operation.  Nevertheless,  the 
council  recognized  the  result  of  the  election  by  reorganiz- 
ing the  Local  Transportation  Committee.  Alderman 
Foreman  was  retired  as  chairman,  and  in  his  place  Alder- 
man Charles  Werno  was  selected,  a  Democrat  and  a  sup- 
porter of  the  mayor's  policy.  Several  plans  of  procedure 
were  proposed  by  the  mayor;  but  action  on  these  was 
defeated  or  postponed,  either  in  the  committee  or  in  the 


392  QUARTERLY  JOURNAL  OF  ECONOMICS 

council.1  In  the  latter  part  of  the  year,  negotiations  were 
again  renewed  with  the  representatives  of  the  companies; 
and  a  second  tentative  ordinance  was  prepared  and  re- 
ported to  the  council.  But  this  ordinance  did  not  prove 
satisfactory  even  to  many  of  those  opposed  to  the  policy 
of  immediate  municipal  ownership.  And  it  was  under- 
stood that  leaders  in  the  Voters'  League  and  the  indepen- 
dent newspapers  declined  to  support  it. 

Under  these  circumstances  the  council  decided  to  sub- 
mit to  the  voters  at  the  election  in  April,  1906,  the  ques- 
tion of  authorizing  an  issue  of  $75,000,000  of  street  rail- 
way certificates,  under  the  provisions  of  the  Miiller  Law, 
with  which  to  purchase  or  construct  street  railways;  and 
also  the  question  of  municipal  operation.  At  the  same 
time  there  was  submitted,  under  the  public  policy  act, 
a  general  question  whether  the  city  should  proceed  under 
the  Miiller  Act  in  preference  to  passing  franchise  ordinances. 
The  result  of  these  votes  was  as  follows : — 

Yes.  No. 

(1)  On  the  issue  of  Miiller  Law  certificates      .    110,225       106,859 

(2)  On  municipal  operation 121,916        110,323 

(3)  Public  policy  question       111,955        108,087 


1  An  interesting  episode  was  that  connected  with  the  visit  of  Mr.  Dalrymple, 
general  manager  of  the  municipal  tramways  of  Glasgow,  Scotland.  Immediately 
after  his  election  Mr.  Dunne  cabled  to  the  Lord  Provost  of  Glasgow,  requesting  the 
Glasgow  authorities  to  allow  their  tramway  manager  to  visit  Chicago.  It  was 
afterwards  explained  that  Mr.  Dunne  had  acted  on  the  advice  of  Mayor  Johnson 
of  Cleveland,  and  that  the  latter  had  in  mind  Mr.  Young,  the  former  manager  of 
the  Glasgow  lines,  who  by  the  irony  of  fate  had  gone  to  London  to  take  charge 
of  Mr.  Yerkes's  new  undertakings  there.  Mr.  Dalrymple  came  to  Chicago,  saw 
Mayor  Dunne  and  his  friends,  but  was  not  brought  into  communication  with  the 
Council  Committee  on  Local  Transportation.  He  did,  however,  meet  some  of 
the  representatives  of  the  companies,  and  looked  over  the  situation  in  Chicago  and 
other  American  cities.  When  his  report  was  received,  Mayor  Dunne  declined  to 
make  it  public  on  the  ground  that  Mr.  Dalrymple  had  been  his  personal  guest. 
Eventually,  the  council  secured  a  copy  of  this  report  thru  the  Glasgow  Town 
Council.  The  first  report  was  brief  and  rather  vague,  recommending  an  agreement 
with  the  companies  on  account  of  the  difficulties  of  municipalization,  among  which 
were  mentioned  the  ninety-nine-year  act,  the  methods  of  municipal  work  in  the 
United  States,  and  the  detached  nature  of  the  expiring  franchises.  A  second  report, 
sent  at  the  special  request  of  Mayor  Dunne,  discussed  methods  of  administration. 


STREET  RAILWAY  QUESTION  IX  CHICAGO        393 

The  vote  on  the  first  question  definitely  authorized  the 
issue  of  street  railway  certificates  under  the  statute.  But 
it  has  been  recognized  that  there  is  some  doubt  whether 
the  courts  will  recognize  the  validity  of  the  provisions  in 
the  law  excluding  such  certificates  from  the  city  debt  limit. 
And  this  legal  question  had  to  be  determined  before  active 
measures  could  be  taken.  The  vote  on  municipal  opera- 
tion, altho  showing  a  larger  majority  in  its  favor,  was  not 
equal  to  the  three-fifths  vote  required  by  the  Miiller  Law; 
and  that  part  of  the  mayor's  policy  was,  for  the  time  at 
least,  defeated.  The  vote  on  all  of  the  questions  showed 
a  large  increase  over  the  previous  referendum  votes,  a 
notable  decline  in  the  vote  in  favor  of  municipalization, 
and  an  enormous  increase  of  the  vote  in  opposition. 

Just  before  the  election  the  legal  situation  was  clarified 
by  a  decision  of  the  United  States  Supreme  Court,  in 
effect  overruling  the  decision  of  the  Circuit  Court  as  to 
the  rights  of  the  companies  under  the  ninety-nine  year 
act.  The  Supreme  Court  decided  against  some  of  the 
arguments  presented  for  the  city,  denying  the  jurisdiction 
of  the  United  States  courts  and  the  constitutionality  of 
the  act  of  1865.  But,  in  interpreting  that  act,  the  court 
held  that,  while  it  clearly  extended  the  corporate  life  of 
the  older  companies  for  a  period  of  ninety-nine  years,  the 
ambiguous  clause  on  which  the  claims  to  an  extension  of 
the  franchises  were  based  must  be  interpreted  in  accord- 
ance with  the  established  principle  "that  one  who  asserts 
private  rights  in  public  property  under  grants  of  the 
character  of  those  under  consideration  must,  if  he  would 
establish  them,  come  prepared  to  show  that  they  have 
been  conferred  in  plain  terms,  for  nothing  passes  by  the 
grant  unless  it  be  clearly  stated  or  necessarily  implied. " 
As  Chief  Justice  Taney  had  said  in  an  earlier  case,  "The 
rule  of  construction  in  cases  of  this  description  ...  is  this, 
that  any  ambiguity  in  the  terms  of  the  grant  must  operate 


394  QUARTERLY  JOURNAL  OF  ECONOMICS 

against  the  corporation  and  in  favor  of  the  public,  and 
the  corporation  can  claim  nothing  that  is  not  clearly  given 
by  the  law."  1 

Applying  this  principle,  it  was  held  that  "it  cannot  be 
successfully  maintained  that  the  act  of  1865  contains  a 
clear  expression  of  legislative  intention  to  extend  the 
franchise  of  these  corporations  to  use  the  streets  of  Chicago, 
without  reference  to  the  assent  of  the  city,  for  the  long 
term  of  ninety-nine  years;  and  for  that  time  preventing 
other  and  different  legislation  restricting  the  grant  of  a 
practically  exclusive  right." 

A  dissenting  opinion  was  filed  by  Justice  Kenna,  with 
whom  Justices  Brewer  and  Brown  concurred,  upholding 
the  claims  of  the  companies  on  the  ground  that  the 
clause  clearly  intended  to  confer  such  a  grant,  and  that 
this  interpretation  was  confirmed  by  the  opposition  to 
the  act  and  the  arguments  presented  in  Governor  Oglesby's 
veto  message. 

In  discussing  some  minor  points,  the  court  recognized 
the  distinction  in  the  terms  of  the  earliest  grants  by  the 
city,  on  which  the  companies'  rights  now  rested.  While 
on  the  north  side  the  earlier  grants  had  all  definitely 
expired,  on  the  south  and  west  sides  the  franchises  con- 
tinued until  the  city  should  purchase  the  plant  and 
equipment.2 

As  a  result  of  this  decison,  the  position  of  the  city  was 
greatly  strengthened  as  against  the  companies,  which  had 
left  merely  a  few  detached  pieces  of  street  railway  line, 
built  under  later  franchises,  and  on  the  south  and  west 
sides  the  right  to  compensation  for  their  cars  and  tracks. 

1  Ferine  v.  Chesapeake  &  Canal  Co.,  9  Howard,  172.    Cf.  Chas.  River  Bridge  v. 
Warren  Bridge,  11  Peters,  429;    Binghamton  Bridge  v.  Binghamton  Bridge  Co.,  3 
Wallace,  51,  75;  North-western  Fertilizing  Co.  v.  Hyde  Park,  97  U.  S.  659;  Stidell  v. 
Grandgean,  111  U.  S.  412;    Corson  Mining  Co.  v.  South  Carolina,  144  U.  S.  550; 
Knoxville  Water  Co.  v.  Knoxvitte,  200  U.  S.  22,  34. 

2  Blair  v.  Chicago,  201  U.  S.  400. 


STREET  RAILWAY  QUESTION  IN  CHICAGO        395 

At  the  same  time  the  local  election  had  committed  the 
city  to  the  policy  of  municipal  ownership,  but  had  also 
blocked  any  immediate  municipal  operation.  This  situ- 
ation caused  both  the  mayor  and  the  companies  to  modify 
their  attitude. 

On  the  mayor's  side  this  change  was  first  Indicated  by 
the  retirement  of  Mr.  Clarence  S.  Barrow  from  the  posi- 
tion of  special  legal  adviser  on  street  railway  matters, 
and  the  appointment  to  that  place  of  Mr.  Walter  L. 
Fisher,  who  had  been  secretary  and  later  president  of  the 
Municipal  Voters'  League,  and  had  drafted  the  original 
Miiller  bill.  This  appointment  was  followed  by  a  bitter 
and  unwarrantable  attack  on  Mr.  Fisher  by  some  of  the 
former  opponents  of  the  mayor's  policy.  But  it  proved 
to  be  one  of  the  wisest  steps  taken  by  the  mayor,  and  the 
settlement  which  has  been  adopted  is  due  in  very  large 
part  to  Mr.  Fisher.  On  April  27,  1906,  Mayor  Dunne, 
doubtless  with  the  advice  of  his  new  counsel,  addressed 
a  letter  to  Alderman  Werno,  chairman  of  the  Committee 
on  Local  Transportation,  outlining  a  plan  for  a  prompt 
settlement,  on  the  following  basis : — 

(1)  An  agreement  with  the  companies  for  the  purchase 
of  their  property  and  unexpired  rights  at  a  fixed  price. 

(2)  The  temporary  continued  operation  of  the  lines  by 
the  companies  under  a  revocable  license. 

(3)  Immediate  reconstruction  of  the  system  and  im- 
provements in  the  service,  the  cost  to  be  repaid  when  the 
city  should  take  possession. 

(4)  Profits,  above  a  fair  return  to  the  companies  upon 
their  present  and  future  investments,  to  be  divided  with 
the  city. 

On  their  part  the  companies  accepted  the  general  prin- 
ciples of  this  plan.  Negotiations  were  again  opened  be- 
tween their  representatives  and  the  Local  Transportation 
Committee,  with  the  mayor  and  his  special  counsel,  Mr. 


396 


QUARTERLY  JOURNAL  OF  ECONOMICS 


Fisher,  in  regular  attendance.  It  is  of  interest,  also,  to 
note  that  one  of  the  prominent  legal  advisers  in  these  later 
proceedings  has  been  John  M.  Harlan,  who  was  appointed 
by  Judge  Grosscup  in  connection  with  the  litigation  and 
receivership  of  the  north  and  west  side  lines,  as  representa- 
tive of  the  court. 

A  basis  for  agreement  having  been  reached,  one  of  the 
most  important  problems  was  to  determine  the  value  of 
the  existing  plant  and  unexpired  franchises.  For  this 
purpose  a  special  commission  of  engineering  experts  was 
appointed,  consisting  of  Bion  J.  Arnold,  who  had  been 
employed  by  the  Local  Transportation  Committee  for  sev- 
eral years,  Mortimer  E.  Cooley,  dean  of  the  Department 
of  Engineering  in  the  University  of  Michigan,  who  had 
directed  an  exhaustive  investigation  of  the  physical  value 
of  the  railroads  of  Michigan  a  few  years  before,  and  A.  B. 
DuPont,  the  mayor's  engineering  adviser.  In  September 
the  companies  submitted  their  estimates,  which  aggre- 
gated $73,555,000.  About  one-third  of  this  was  for  fran- 
chises, on  the  assumption  that  then*  remaining  rights  were 
equivalent  to  an  average  of  seven  years  on  all  the  existing 
lines.  But  the  Commission's  report,  made  in  December, 
reduced  these  figures  by  more  than  a  third.  A  compara- 
tive summary  of  the  two  estimates  is  given  below: — 


Physical 
Property. 

Franchises. 

Total 
without 
Paving. 

Total 
including 
Paving. 

Chicago  City  Railway: 
Company's  valuation     .    . 
Commissioners'  valuation  . 

$20,103,936 
16,782,147 

$10,332,228 
3,754,363 

$20,536,510 

$30,436,164 
22,369,068 

Chicago  Union  Traction  Co.: 
Company's  valuation     .    . 
Commissioners'  valuation  . 

$29,294,471 
20,853,629 

$13,825,040 
5,262,608 

$26,116,237 

$43,119,511 
28,625,714 

Both  companies: 
Company's  valuation     .    . 
Commissioners'  valuation  . 

$49,398,407 
37,635,776 

$24,157,268 
9,016,971 

$46,652,747 

$73,555,675 
50,994,782 

STREET  RAILWAY  QUESTION  IN  CHICAGO        397 

The  commissioners'  valuation  for  physical  property 
was  about  $10,000,000  more  than  the  valuation  determined 
in  an  investigation  by  the  Arnold  Company  in  1902.  This 
was  due  in  part  to  the  increased  price  of  materials  on  which 
the  estimates  were  based,  and  in  part  to  new  equipment 
that  had  been  added  since  the  earlier  valuation.  In  other 
respects  the  valuation  must  be  considered  as  fairly  liberal 
to  the  companies.  The  physical  property  was  valued  on 
the  basis  of  the  cost  of  reconstruction  at  existing  prices, 
less  allowances  for  depreciation.  The  cable  roads  on  the 
south  and  west  sides  were  valued  as  operating  lines  (al- 
though it  was  evident  the  plant  must  be  discarded  in  the 
reconstruction  work)  in  recognition  of  the  fact  that  the 
companies  had  a  legal  right  to  operate  these  lines  until 
purchased  by  the  city.  On  the  other  hand,  the  north  side 
lines,  where  the  city  was  under  no  legal  obligation  to  pur- 
chase at  all,  were  estimated  at  the  value  of  the  equip- 
ment in  a  reconstructed  system.  Whether  the  city  should 
repay  the  companies  for  street  paving  was  left  an  open  ques- 
tion in  the  commissioners'  report.  The  franchise  values 
were  determined  by  estimating  the  unexpired  franchises 
not  as  detached  lines,  but  as  part  of  the  existing  systems. 
And  to  this  were  added  the  estimated  profits  on  all  the 
existing  lines  for  a  period  of  eighteen  months,  which  period, 
it  was  estimated,  would  elapse  before  the  city  could  take 
possession  of  the  property  by  eminent  domain  or  other 
compulsory  proceedings. 

In  the  end  the  representatives  of  the  companies  agreed 
to  accept  the  round  sum  of  $50,000,000  for  the  physical 
property  and  existing  franchise  rights.  This  was  prac- 
tically the  Commissioners'  figures,  allowing  the  companies 
the  greater  part  of  their  claim  for  street  paving.  A  com- 
parison of  this  amount  with  the  capitalization  of  the  com- 
panies ($117,000,000  in  1901)  shows  to  what  extent  the 
capital  had  been  inflated  on  the  basis  of  the  claims  under 


398  QUARTERLY  JOURNAL  OF  ECONOMICS 

the  ninety-nine  year  act.  Indeed,  three-fourths  of  the 
stock  and  bonds  of  the  north  and  west  side  lines  have  now 
no  substantial  value. 

While  these  valuations  were  being  determined,  negotia- 
tions proceeded  on  other  points.  Arrangements  have  been 
made  for  the  reorganization  of  the  companies  in  the  hands 
of  receivers  and  for  the  organization  of  a  new  company— 
the  Chicago  Railways  Company — to  take  over  the  operation 
of  the  lines  and  furnish  capital  for  the  rehabilitation  of  the 
whole  system.  The  cable  roads  are  to  be  reconstructed. 
Subways  are  to  be  provided  in  the  business  district.  Ex- 
tensions and  new  equipment  are  to  be  furnished.  For 
this  purpose  it  is  estimated  that  $40,000,000  will  be  needed. 
It  has  been  provided  that  this  shall  be  spent  under  the 
supervision  of  three  engineers,  two  of  them  designated  by 
the  city.  The  companies,  however,  are  to  be  allowed  10 
per  cent,  as  contractor's  profit,  and  5  per  cent,  brokerage 
over  the  actual  cost  of  construction,  if  the  city  should 
purchase  the  plant. 

Arrangements  for  the  operation  of  the  lines  are  much 
more  distinctly  in  the  interest  of  the  city  and  the  public 
than  in  either  of  the  previous  tentative  ordinances. 
The  companies  are  to  operate  on  a  license  revocable  at 
any  time  on  six  months'  notice,  the  city  having  the  right 
to  purchase  at  the  stipulated  price  of  $50,000,000  for 
the  existing  plant  plus  the  cost  of  improvements.  All 
of  the  lines  are  to  be  operated  as  parts  of  one  system, 
with  a  considerable  number  of  thru  routes  and  transfers 
from  one  district  to  another.  The  city  is  to  have  a  large 
measure  of  control  over  the  frequency  of  service  and 
supervision  over  the  accounts  of  the  company.  And  the 
profits,  after  paying  operating  expenses,  taxes,  and  5 
per  cent,  on  the  actual  investment,  are  to  be  divided,— 
55  per  cent,  to  the  city  and  45  per  cent,  to  the  company. 
The  plan,  as  a  whole,  may  be  called  one  establishing  a 


STREET  RAILWAY  QUESTION  IN  CHICAGO       399 

joint  partnership  between  the  cities  and  companies  for  the 
control  and  operation  of  the  street  railways. 

By  the  middle  of  January,  1907,  the  agreement  between 
the  council  committee  and  the  representatives  of  the 
companies  had  been  drafted  in  the  form  of  proposed 
ordinances  and  submitted  to  the  council.  Until  the  pre- 
vious month  it  had  seemed  probable  that  the  arrange- 
ments would  prove  satisfactory  to  all  parties,  and  the 
ordinances  might  be  passed  promptly.  But  in  the  latter 
part  of  December  some  of  the  more  radical  advocates 
of  municipal  ownership  raised  objections,  apparently 
fearing  that  improved  service  on  the  part  of  the  com- 
panies would  satisfy  the  public,  and  that  the  provisions 
for  municipal  operation  would  not  be  utilized.  It  is 
true  that  this  may  be  the  result.  But  for  the  friends  of 
municipalization  to  urge  this  seems  a  confession  of  weak- 
ness in  their  argument  that  any  system  of  regulation  is 
bound  to  fail.  Mayor  Dunne,  who  had  co-operated  in  the 
work  of  drafting  the  ordinances,  suddenly  joined  this  late 
movement,  which  took  the  form  of  demanding  a  popular 
referendum  on  the  proposed  ordinances.  Once  this  de- 
mand was  made,  however,  it  should  have  been  evident 
that  it  must  be  granted;  and  the  attempt  of  some  sup- 
porters of  the  agreement  to  oppose  the  movement  was 
clearly  a  tactical  error.  Petitions  calling  for  a  referendum 
were  signed  by  189,000  names;  and  it  was  soon  acknowl- 
edged that  this  must  be  provided. 

In  a  tense  and  dramatic  all-night  session  on  February 
4-5,  1907,  the  ordinances  came  before  the  council  for 
action.  Some  minor  amendments  were  accepted  by  the 
committee  and  adopted.  A  large  number  of  others  pre- 
sented by  the  opponents  were  defeated.  Many  of  these 
would  have  be*en  to  the  interest  of  the  city  and  the  public. 
But  the  representatives  of  the  company  had  declined  to 
accept  them;  and,  in  the  opinion  of  the  majority  of  the 


400  QUARTERLY  JOURNAL  OF  ECONOMICS 

council,  they  were  not  of  sufficient  importance  to  cause  the 
defeat  of  the  agreement  that  had  been  reached.  Another 
contest  arose  on  the  precise  form  in  which  the  referendum 
should  be  submitted.  It  is  fair  to  note  that  the  opponents 
of  the  ordinance  are  all  classed  among  the  honest,  but  not 
always  among  the  most  able,  members  of  the  council,  and 
that  the  few  remaining  "gray  wolves'7  voted  with  the 
majority.  Chairman  Werno  and  a  majority  of  the  Demo- 
cratic members  of  the  council  declined  to  follow  the  mayor 
in  his  latest  change  of  attitude,  and  supported  the  ordi- 
nances. In  the  end  the  council  passed  the  ordinances 
by  a  vote  of  55  to  14,  subject  to  the  result  of  a  referendum 
at  the  municipal  election  in  April.  Mayor  Dunne  declined 
to  sign  them;  but  they  were  repassed  over  his  veto  at  the 
next  session  of  the  council. 

For  two  months,  from  the  passage  of  the  ordinances  by 
the  council  until  the  municipal  election,  the  question  as 
to  their  ratification  or  defeat  has  been  the  all-important 
issue  before  the  people  of  Chicago.  Around  it  centred  the 
contest  for  city  officials.  The  Republicans,  nominating 
for  mayor  F.  A.  Busse,  recently  appointed  postmaster 
of  the  city,  strongly  indorsed  the  ordinances.  The  Demo- 
crats, renominating  Mayor  Dunne,  declared  in  favor  of 
municipalization  through  condemnation  proceedings.  But 
party  lines  were  not  strictly  followed;  and  notably  a  ma- 
jority of  the  Democratic  aldermen,  while  supporting  their 
party  candidates,  were  also  in  favor  of  the  ordinances. 
Other  questions,  which  it  is  not  necessary  to  consider  here, 
also  entered  to  some  extent  into  the  campaign  for  city 
officers.  In  the  outcome  the  ordinances  were  approved 
by  a  vote  of  165,846  to  132,720;  while  Mr.  Busse  and  most 
of  the  Republican  ticket  were  elected  by  much  smaller 
pluralities. 

On  April  18  the  Supreme  Court  of  Illinois  rendered  a 
decision  in  the  case  involving  the  validity  of  the  Miiller 


STREET   RAILWAY  QUESTION  IN  CHICAGO       401 

Law  certificates,  and  held  that  these  certificates  must 
be  included  as  part  of  the  city  debt,  inasmuch  as  they 
were  to  be  guaranteed  by  a  right  to  operate  street  rail- 
ways as  well  as  by  the  physical  property  of  the  roads. 
This  ruling,  with  the  existing  limitations  on  city  debt, 
make  it  practically  impossible  for  the  city  to  purchase  or 
build  a  strictly  municipal  railway  without  a  change  hi  the 
state  constitution;  and  the  provisions  in  the  new  agree- 
ment for  municipal  purchase  will  therefore  be  inoperative. 
It  will  be  possible,  however,  under  the  agreement,  for 
the  city  to  transfer  the  rights  to  other  licensee  companies, 
on  payment  for  the  value  of  the  property,  with  20  per 
cent,  in  addition,  if  transferred  to  another  profit-mak- 
ing company  within  twenty  years. 


V. 

In  attempting  to  draw  some  general  conclusions  from 
this  contest,  which  rivals  in  duration  and  interest  the 
Trojan  War,  it  is  necessary  to  emphasize  some  points  that 
are  likely  to  be  overlooked,  if  attention  is  paid  only  to  the 
latest  stage  in  the  conflict.  In  the  first  place,  the  duration 
of  the  controversy  is  evidence  of  the  tenacity  of  purpose 
on  the  part  of  the  people  of  Chicago  in  resisting  the  efforts 
of  the  financial  promoters  to  perpetuate  their  control. 
The  public  policy  votes  on  the  earlier  tentative  ordinances 
showed  that  no  franchise  drawn  on  the  traditional  American 
lines  would  be  acceptable. 

In  the  second  place,  it  will  be  a  mistake  to  assume  that 
the  adoption  of  the  present  ordinances  indicates  that  the 
popular  demand  fof  municipalization  was  merely  a  tem- 
porary wave  of  sentiment,  which  is  now  fast  receding. 
The  demand  for  municipalization  was  indeed  aroused  by 
the  intolerable  service  and  the  hostile  attitude  of  the 


402  QUARTERLY  JOURNAL  OF  ECONOMICS 

companies,  and,  so  long  as  the  companies  maintained  their 
former  position,  municipalization  seemed  to  be  the  only 
alternative  policy.  But  it  must  not  be  overlooked  that 
the  actual  vote  against  the  ordinances  was  almost  as  large 
as  the  first  vote  for  municipal  ownership  in  1902,  and 
larger  than  either  of  the  subsequent  votes  in  favor  of 
municipalization.  The  latest  vote  indicates  that  the  ordi- 
nances have  been  approved  by  the  action  of  those  who 
were  not  willing  to  vote  in  former  years  for  municipaliza- 
tion but  were  also  not  willing  to  vote  for  any  of  the  alter- 
native plans  then  presented. 

In  the  third  place,  as  stated  at  the  outset,  these  ordi- 
nances set  a  new  standard  in  the  relations  between  street 
railway  companies  and  public  authorities  in  this  country. 
They  establish  on  a  new  basis  the  old  doctrine  of  public 
ownership  of  the  streets,  and  effective  public  control  over 
any  private  company  which  receives  special  privileges  in 
the  public  highways.  The  revocable  license  is  a  much 
more  tangible  feature  than  the  nominal  power  of  revoca- 
tion in  Massachusetts  franchises,  as  in  the  Chicago  ordi- 
nances there  are  explicit  means  provided  by  which  the 
lines  can  be  taken  from  the  companies  with  whom  the 
present  agreement  is  made.  And  the  division  of  profits, 
supplementing  the  system  of  public  control,  makes  the  city 
in  fact  an  active  partner  in  the  street  railway  business. 

As  to  the  future,  the  firm  believers  in  and  the  convinced 
opponents  of  municipalization  will  each  have  their  own 
predictions.  The  writer  believes  that  there  is  a  fair 
promise  that,  if  the  companies  carry  out  their  part  of  the 
agreement  and  co-operate  heartily  with  the  city  authori- 
ties, there  will  be  no  further  steps  in  the  direction  of 
municipalization  for  many  years.  But  if  the  service  is 
not  brought  promptly  to  a  satisfactory  standard,  or  if 
there  should  be  a  revival  of  the  policy  of  speculative 
finance  or  political  manipulation,  the  city  will  not  remain 


STREET  RAILWAY   QUESTION  IN  CHICAGO        403 

entirely  at  the  mercy  of  the  present  companies.  In  that 
case  there  may  be  a  trial  of  the  so-called  "contract  plan," 
by  which  the  street  railways  would  be  transferred  to  a 
licensee  corporation  acting  as  trustee  for  the  city.  Or 
it  is  not  impossible  that  the  State  Constitution  may  be 
amended  to  provide  an  effective  means  for  municipaliza- 
tion. 

JOHN  A.  FAIRLIE. 
UNIVERSITY  OF  MICHIGAN. 


BIBLIOGRAPHICAL   NOTE. 

There  is  a  voluminous  mass  of  printed  material  on  the  Chicago  Street  Rail- 
ways, but  it  is  widely  scattered,  and  there  is  nothing  approaching  a  complete 
collection  in  one  place.  Among  primary  sources  may  be  mentioned  the  official 
records  of  the  Illinois  State  legislature  and  the  City  Council  of  Chicago,  and  the 
judicial  reports  on  the  litigated  questions.  The  most  important  documents  have 
also  been  reprinted,  and  in  addition  there  have  been  scores  of  pamphlets  and  articles 
in  periodicals.  A  list  of  documents,  pamphlets,  and  longer  articles,  excluding 
items  in  the  daily  and  weekly  press,  would  contain  more  than  a  hundred  titles, 
and  only  the  more  important  among  them  are  given  in  the  following  list. 

Official  Documents: 

Mayor  Carter  H.  Harrison:    Special  Message  January  6,    1902,  and  Annual 

Messages,  May  25,  1903,  April  11,  1904,  and  April  10,  1905. 
Mayor  Edward  F.  Dunne:  Annual  Messages,  April  11,  1906,  and  April  15,  1907. 

Letter  to  Alderman  Charles  Werno,  April  27,  1906. 
Council  Committees: 

Report  of  the  Special  Committee  of  the  City  Council  of  Chicago  on  Street 

Railway  Franchises,  March,  1898. 

Report  of  the  Street  Railway  Commission,  December,  1900. 
Report  of  the  Special  Committee  on  Local  Transportation,  outlining  the 

provisions  of  a  renewal  ordinance,  December,  1901. 
An  ordinance  granting  rights  to   the  Chicago   City   Railway  Company 

(tentative  ordinance),  July  23,  1904. 

Report  of  the  Committee  on  Local  Transportation,   and  ordinances,  Jan- 
uary 15,  1907. 
Bion  J.  Arnold :  Reports  on  Engineering  and  Operating  Features  of  the  Chicago 

Transportation  Problem,  1902-1906. 

Traction  Valuation  Commission:    Report  on  the   Values  of  the  Tangible  and 
Intangible  Properties  of  the  Chicago  Street  Railway  Companies,  December 
10,  1906. 
Judicial  Reports: 

Circuit  Court  of  the  United  States:   Guaranty  Trust  Co.  v.  Chicago  Union 

Traction  Co.,  etc.  1903  (over  20  vols.). 

Supreme  Court  of  the  United  States:   H.  A.  Blair  et  al.  v.  City  of  Chi- 
cago, and  other  cases,  201  U.  S.  400  (1906). 
Supreme  Court  of  Illinois:  Lobdell  et  al.  v.  City  o£Chicago  (1907). 


404  QUARTERLY  JOURNAL  OF  ECONOMICS 

Special  Pamphlets: 

History  and  Statistics  of  Chicago  Street  Railway  Corporations  (Supplement  to 

the  Economist),  52  pp.     Maps.     Chicago,  1896. 
List  of  Franchises,  1837-1896.     Chicago,  J.  F.  Higgins,  1896. 
Illinois  Bureau  of  Labor  Statistics:  The  Street  Railways  of  Chicago  and  Other 

Cities  (1897). 

Articles  in  Periodicals: 

Quarterly  Journal  of  Economics,  vol.  xii.  83  (J.  H.  Gray). 

Municipal  Affairs,  vol.  v.  439-594  (Report  of  Civic  Federation). 

National  Conference  for  Good  City  Government,  1902  (George  C.  Sikes). 

Atlantic  Monthly,  vol.  xciii.  109  (E.  B.  Smith). 

American  Law  Review,  vol.  xxxix.  244. 

Annals  of  the  American  Academy  of  Social  and  Political  Science,  vol.  xx.  356; 

vol.  xxvii.  72 ;  vol.  xxix.  385. 

International  Quarterly,  vol.  xii.  13  (C.  S.  Darrow). 
Review  of  Reviews,  vol.  xxxiii.  549. 

Three  collections  of  material  of  special  value  should  be  noted:  (1)  that  of 
Professor  John  H.  Gray,  of  Northwestern  University  (the  best  single  collection) , 
which  includes  the  voluminous  record  of  the  Circuit  Court  proceedings,  two  large 
bound  volumes  of  documents  and  miscellaneous  pamphlets,  and  a  manuscript 
thesis  by  George  B.  Goodwin  on  "The  History  of  the  Chicago  Street  Railways"; 
(2)  that  of  the  John  Crerar  Library,  which  includes  a  bound  volume  of  documents, 
pamphlets,  and  newspaper  clippings  connected  with  the  Humphrey-Allen  Bills  of 
1897,  by  George  E.  Hooker,  a  box  of  pamphlets,  and  also  other  documents  sepa- 
rately catalogued;  and  (3)  that  of  the  City  Club  of  Chicago,  which  includes  two 
boxes  of  miscellaneous  documents  and  pamphlets.  While  there  is  some  duplication 
each  of  these  contains  important  material  not  in  the  others.  There  are,  in  addi- 
tion, a  good  number  of  pamphlets  and  special  reports  not  in  any  of  these  collections. 


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